Wall Street might be cool on equities these days, but that’s a great buy indicator, says one analyst.

“Wall Street’s bearishness on equities remains at extreme levels relative to history,” said Savita Subramanian, equity and quantitative strategist at Bank of America Merill Lynch. “Given the contrarian nature of this indicator, we remain encouraged by Wall Street’s ongoing lack of optimism.”

Bank of America Merrill Lynch uses the Sell Side Indicator to gauge Wall Street’s attitude toward stocks in any given month. That indicator, which measures the average recommended equity allocation of Wall Street strategists, rose slightly (o.4 points) in December to 47 points. That means strategists are, on average, recommending that 47% of a portfolio should in in equities.

While the indicator has been rising steadily since hitting a bottom of 43.9 in July, it is still well outside the traditional long-term average of 60-65.

“The indicator remains firmly in ‘Buy’ territory, a signal that it first flashed in May,” Ms. Subramanian said.

She adds that whenever the Sell Side Indicator has been below 50, total returns for the S&P 500 have been positive 100% of the time, with a median 12-month return of more than 30%.

Based on the current numbers, Ms. Subramanian said the expected 12-month return for the S&P 500, based on an indicated dividend yield that is slightly above 2%, would be more than 26%.